Convocation Notice of the 171 st Ordinary General Meeting of Shareholders

Transcription

1 koi (Note) This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. To Our Shareholders: Stock Code 2503 March 4, 2010 Convocation Notice of the 171 st Ordinary General Meeting of Shareholders Dear Shareholders: Please be advised that the 171 st Ordinary General Meeting of Shareholders of the Company will be held as set forth below. You are cordially requested to attend the Meeting. Yours very truly, Kazuyasu Kato Representative Director and President Kirin Holdings Company, Limited 10-1, Shinkawa 2-chome, Chuo-ku, Tokyo If you do not plan to attend the Meeting, you may exercise your voting rights in either of the following ways. Please review the accompanying Reference Documents for the General Meeting of Shareholders and exercise your voting rights by 5:30 p.m., March 25, 2010 (JST): Exercise of voting rights via postal mail: [Translation omitted.] Exercise of voting rights via the Internet: [Translation omitted.] 1

2 Details of the Meeting 1. Date and Time: 2. Place: March 26, 2010, (Friday) at 10:00 a.m. (JST) Convention Hall, B2, The Prince Park Tower Tokyo 8-1, Shiba Koen 4-chome, Minato-ku, Tokyo 3. Agenda: Matters to be reported: 1) Report on the business report, the consolidated financial statements and the results of the audit of the consolidated financial statements by the Independent Auditors and Board of Corporate Auditors for the 171 st business term (from January 1, 2009 to December 31, 2009). 2) Report on the financial statements for the 171 st business term (from January 1, 2009 to December 31, 2009). Matters to be voted on: Proposition No. 1: Proposition No. 2: Proposition No. 3: Proposition No. 4: Dividend and disposition of surplus Election of nine (9) Directors Election of one (1) Corporate Auditor Presentation of bonuses to corporate officers 4. Exercise of Voting Rights In the case votes both via postal mail and via the Internet (double-vote) are received, the Internet vote will be considered as valid. When exercising voting rights via the Internet, it is possible to vote multiple times, and in such cases, the last vote will be considered as valid. Please present the Voting Rights Exercise Form enclosed herewith to the reception of the meeting place if you are to exercise your voting rights at the Meeting. If any changes are required in the Reference Documents for the General Meeting of Shareholders, business report, financial statements and consolidated financial statements, the changes will be posted on the Company s website (Investor Relations) located at ( 2

3 (Attached documents) BUSINESS REPORT (For the period from January 1 to December 31, 2009) 1. Overview of Kirin Group business activities (1) Kirin Group developments and results of business activities The global economy remained in a serious condition throughout this consolidated fiscal year, in spite of indications that the downturn might have bottomed out. In Japan, economic stimulus plans and other measures had positive effects leading to a mild recovery but the unemployment rate and such continue to be less than favorable. At Kirin Group, we regarded the three-year period from 2007 through 2009 as the first stage of the long-term business framework Kirin Group Vision 2015 (KV2015). As the final year of this first stage, fiscal 2009 targeted expanding the business bases necessary for the quantum leap in growth and engaging qualitative expansion to improve profitability. As a part of these efforts, we pursued development of group synergies and promoted an integrated beverages group strategy aimed at fusing together the value chains of alcohol and other beverages. In the Japanese market, the foundation for our quantum leap in growth, further efforts were expended to ensure a solid footing. Kirin Brewery Co., Ltd. has received a level of high customer support for meeting customer needs in the midst of a difficult consumer market throughout the year. In overseas markets, we strengthened relationships with our well-established partners, especially in Asia and Oceania, promoting an integrated beverages group strategy. In May Kirin Holdings Co., Ltd. acquired shares in San Miguel Brewery, Inc., the dominant market leader in the Philippines, and made it an affiliated company. In December, San Miguel Brewery concluded an agreement to purchase all shares of San Miguel Brewing International Ltd., the company responsible for San Miguel Corporation s overseas beer business, from San Miguel Corporation. These acquisitions resulted in our establishing invaluable operating bases in Asia for the Kirin Group. In October Lion Nathan Ltd. was made a wholly owned subsidiary to promote our integrated beverages group strategy in Oceania. At the same time, Lion Nathan and National Foods Ltd. were consolidated under Kirin Holdings (Australia) Pty Ltd, the name of which was then changed to Lion Nathan National Foods Pty Ltd, as our holding company in Australia effective October 21. Through utilization of the management capabilities of Lion Nathan National Foods, we pursue organic growth of these companies and create mutual synergies. Consolidated sales for fiscal 2009 declined slightly due to foreign exchange effects despite good progress in the Soft Drinks and Food Business in Australia and inclusion of Kyowa Hakko Kirin Co., Ltd. as a consolidated subsidiary. Operating income also declined due to foreign currency translations, albeit good progress was seen in the Alcohol Beverages 3

4 Business in Japan and overseas. Ordinary income increased considerably with the foreign currency translation gains. The net income for the fiscal year declined due to gain on change in equity recorded on the share exchange in the second quarter of Consolidated sales 2,278.4 billion (down 1.1% compared to the previous term) Consolidated operating income billion (down 12.0% compared to the previous term) Consolidated ordinary income billion (up 40.3% compared to the previous term) Consolidated net income 49.1 billion (down 38.7% compared to the previous term) Alcohol Beverages Business Division In the domestic alcoholic beverages market, Kirin Brewery has received a high level of customer support during the year through initiatives focusing on three strategic priorities: strengthening core brands, improving our response to consumer health consciousness, and increasing overall demand. In the beer market, strong sales of Kirin Ichiban Shibori continued following its re-launch in March In the happo-shu category our Tanrei series enjoyed growing customer support in the on-premise market, as well as its traditional retail market. In the fast-growing new genre market, the dominant brand Kirin Nodogoshi Nama was able to achieve its largest annual sales volume since it was first introduced, due to heightened price sensitivity among consumers keeping a close eye on their purse strings. In this market of new genre products, in addition to the core brand, the new brands Kirin Koku no Jikan and Kirin Hoppu no Shinjitsu were introduced in an effort to increase overall demand. Furthermore, as a product responding to the heightened social awareness calling for zero tolerance of drunk driving, Kirin FREE, a non-alcohol beer-taste beverage launched in April, has grown in popularity, greatly surpassing the original forecast, and became a major hit product in 2009, creating a market of new value, namely for 0.00% alcohol beer-taste beverages. In the rapidly growing RTD* market, we have strengthened the Hyoketsu series, and launched Kirin Cola Shock with the aim of rejuvenating the market as well as expanding overall demand. In the shochu business, we focused sales efforts on the Hakusui series as the core product. In the western liquor business, a new alliance was formed with Diageo in England, enabling us to include the leading brands of the world in our product lineup as an all-around alcohol business. *RTD: an acronym for Ready to Drink ; RTD products are premixed low alcohol beverages that can be drunk straight from the can or bottle. As part of pursuing a lean management approach under the Kirin Group medium-term business plan for , which was announced on October 26, we have decided to rationalize and optimize our manufacturing capacity utilization by reorganizing two plants, the Tochigi Plant (Takanezawa-machi, Shioya-gun, Tochigi Prefecture) and the 4

5 Hokuriku Plant (Hakusan-shi, Ishikawa Prefecture). Both plants are scheduled to cease production after the end of the peak season period of The RTD manufacturing capabilities at the Tochigi Plant and other useful functions will be transferred to other existing plants. At Mercian Corporation, we strove to solidify our position as the market leader in the wine business by strengthening the Mercian brand, and we made progress in adopting value proposal marketing by liaising with Kirin Brewery and Kirin Merchandising Co., Ltd. Sales of wines from mid-range to high-end for restaurants were negatively affected by factors stemming from consumers not dining out due to a heightened sense of frugality. Conversely, consumers are purchasing more day-to-day table wines in the less expensive price range, which has led to an expansion of the household market and as such we recorded healthy sales in inexpensive table wines. Improved profitability was sought by reducing the cost structure of the wine business. In our overseas alcohol beverages business, we continued to pursue our strategy of focusing on enhancing our business foundation in Asia and Oceania. At Lion Nathan in Oceania, although the core beer business in Australia continued to perform strongly supported by the shift to premium beers as well as efforts made by the consolidated subsidiary, J. Boag & Son, foreign currency translations had negative impact on the sales on a Japanese yen basis. In China, the business environment was somber, especially along the coastal regions, and intense price competition impacted the sales environment negatively. However we continued efforts to bolster sales, particularly in the three regions of the Yangtze Delta, the Pearl River Delta and Northeast China, to solidify the foundation of our existing business. Consolidated sales from Alcohol Beverages Business Consolidated operating income from Alcohol Beverages Business 1,097.6 billion (down 7.1% compared to the previous term) billion (down 6.5% compared to the previous term) Soft Drinks and Foods Business Division In the domestic soft drinks and food market, Kirin Beverage Co., Ltd. tenaciously continued initiatives to reform our earning structure through cost reductions and other measures, and focused on increasing the value of leading brands such as Kirin Gogono-Kocha and Kirin FIRE. August marked the 10th anniversary of Kirin FIRE and in addition to the flagship Kirin FIRE Hikitate Bito, we enhanced our product lineup by launching the new Kirin FIRE Hi no Megumi. In the black tea beverages, we continued a range of value proposals to promote our market-leading Kirin Gogono-Kocha series, including revamping the chilled drink Kirin Gogono-Kocha Bito Straight Tea, and pursued initiatives to further strengthen our top black tea beverage brand and secure customer support. In the green tea beverages and mineral water, the economic slowdown sharply impacted sales since frugally-minded consumers reduced spending in this category considerably. 5

6 At Kirin Kyowa Foods Co., Ltd., which was established April 1 by integrating Kirin Food-Tech Co., Ltd. and Kyowa Hakko Food Specialties Co., Ltd., both specializing in seasoning and flavoring, we endeavored to improve the foundation of the business of proposing and offering food ingredients in pursuit of taste and health, utilizing fermentation technologies representing the inherent strengths of both companies. In the overseas soft drinks and food business, Kirin Beverage developed new products in Thailand and Vietnam, responding to the local needs of the respective markets, thereby further expanding the business. In China where the Kirin Gogono-Kocha and Kirin FIRE brands are the focus of our product deployments, Kirin (China) Investment Co., Ltd. decided in December to make a capital investment in Shanghai JinJiang Kirin Beverages and Food Co., Ltd., which handles sales in Shanghai and other major cities in Eastern China, in order to promote an integrated beverages group strategy in China. At National Foods, weak consumer sentiment as a result of the economic slowdown caused a shift to lower-price products in milk, the core product. On the other hand, raw dairy input costs, which had risen sharply from the second half of 2007, eased, leading to improved profitability. Also, overhead cost reduction measures arising from integration of Dairy Farmers have been progressing steadily since its 100% acquisition by National Foods in November Consolidated sales from Soft Drinks and Foods Business Consolidated operating income from Soft Drinks and Foods Business billion (up 2.6% compared to the previous term) 7.0 billion (up 10.4% compared to the previous term) Pharmaceuticals Business Division At Kyowa Hakko Kirin Co., Ltd., sales of anti-anemia medicines NESP and ESPO trended favorably helped by the impact of NESP Injection Plastic Syringe, which was launched in May, while sales of the anti-allergic medicine ALLELOCK and anti-allergic eye drop Patanol maintained good levels in part due to a much higher level of pollen in the air than normal in Japan. The secondary hyperarathyroidism treatment REGPARA TABLETS, which were launched in January 2008 to combat complications arising from blood dialysis, also witnessed further acceptance in the market. In December we started marketing the ulcerative colitis medicine ASACOL together with Zeria Pharmaceutical Co., Ltd. With respect to R&D, we also made progress in the discovery of new candidate drugs both in Japan and overseas: filing in Japan for additional applications of anti-anemia medicine NESP and starting Phase II clinical trials in Japan for KW-0761, a humanized monoclonal antibody with uniquely developed immune technology. 6

7 Consolidated sales from Pharmaceuticals Business Consolidated operating income from Pharmaceuticals Business billion (up 20.5% compared to the previous term) 34.3 billion (up 21.8% compared to the previous term) Other Businesses Divisions In the Biochemical business operated by Kyowa Hakko Bio Co., Ltd., sales of amino acids for overseas medical and industrial use were affected negatively by the global economic recession and unfavorable foreign currency exchange rates. In the area of the supplements-related healthcare business in Japan, synergy effects are beginning to show through raw material supply transactions with group companies. The Chemicals business operated by Kyowa Hakko Chemical Co., Ltd. was affected by the sharp plunge in demand due to the worsening global economy and a sensitive market for these products. In the fourth quarter, however, some regions such as China saw a recovery trend, while signs of a recovery in product markets were also apparent. In the Agribio business, a tough market created by global economic stagnation continued in Europe and other regions, while in Japan we continued to pursue cost reduction measures. A basic agreement was reached in consolidating the raw alcohol business of Mercian and Kyowa Hakko Bio to a newly established joint company, Daiichi Alcohol Co., Ltd., while Mercian s industrial-use alcohol and fermented seasoning businesses will be integrated into Kirin Kyowa Foods Co., Ltd. This consolidation and integration will enable us to further strengthen the foundations of each business and to generate group synergies. Consolidated sales from Other Businesses Consolidated operating income from Other Businesses billion (up 2.2% compared to the previous term) 3.8 billion (down 78.9% compared to the previous term) 7

8 (2) Future challenges for Kirin Group 2010 is the first year of Kirin Group s three-year medium-term business plan, and also marks the second stage in realizing the aims of Kirin Group Vision 2015 ( KV2015 ), Kirin s long-term management vision for the period through to In 2010, management will pursue further qualitative expansion by focusing on generating Group synergies and realizing lean management, with the aim of improving profitability and asset efficiency. At the same time we will build further momentum for the KIRIN brand by continuing to develop products that inspire customers with new value propositions, and pursuing CSR initiatives that build public trust in Kirin Group as a corporate entity. Outline of 2010 Business Plan Basic management strategies Increase Group enterprise value by realizing growth and synergies at operating companies 1. Pursue an integrated beverages group strategy 2. Accelerate growth in pharmaceuticals business 3. Develop the health food and functional food business 4. Generate growth through Group synergies 5. Realize lean management by eliminating strain, waste and irregularity Pursue a financial strategy that supports higher enterprise value Engage in CSR activities that enhance Kirin s coexistence with society Alcoholic Beverages Business In the domestic alcohol beverages market, our efforts at Kirin Brewery will continue to be focused on three strategic priorities with a long-term outlook in order to foster No. 1 leading brands in the categories of beer/happo-shu/new genre products, and RTDs: strengthening core brands, improving our response to consumer health consciousness, and increasing overall demand. In strengthening the core brands, we will strive to enhance brand value by improving the taste and emphasizing the individual product value of Kirin Ichiban Shibori, Kirin Lager, Kirin Tanrei, and Kirin Nodogoshi Nama. In improving our response to consumer health consciousness, we aim to develop a wide variety of products by setting the Tanrei Green Label as the core brand. In increasing overall demand, we will introduce Kirin 1000, an epoch-making new product in the new genre market, as a value-proposing product by employing the "evidence marketing"* technique that was used for Kirin FREE. In the RTDs segment, which has the largest future growth potential, we will promote, as well as the Hyoketsu brand, entirely new concept products, in addition to conventional products centered on fruit juices. Furthermore, we will expand our western liquor lineup, including Diageo brands, in an effort to greatly enhance our appeal as an integrated alcohol beverages enterprise. Kirin Brewery is now in a position to collaborate with group companies like Mercian and 8

9 Kirin Beverage in every value chain in order to create synergies, while reforming cost structures to improve profitability. * A marketing technique that promotes products by providing customers with easy-to-understand evidence and product value that is supported by technological or other forms of proof. A first-ever Groupwide initiative, KIRIN Heath Initiative will be established and under a newly created KIRIN Plus-i brand based on the concept of taste that makes you smile, happiness and health, we will offer beverages/foods and other products that provide new value in the area of food and health, suited to customers personal health needs. Under this initiative, Kirin Brewery will launch nationwide in April, Kirin Yasumuhi no Alc.0.00%, a non-alcohol beer-taste beverage that recommends a day of rest for one s liver (a non-alcohol day). At Mercian, all management resources will continue to be concentrated into the wine business in order to solidify our position as the market leader in the industry. We will also work to enhance profitability, and aim to create group synergy through even greater collaboration with Kirin Brewery and Kirin Merchandising. In our overseas alcohol beverages business, Lion Nathan will continue to shift our product mix into the premium beer category by improving value to the customers. In China, we will roll out initiatives to establish a unique business model with an integrated beverages group strategy as the main pillar, focusing on the regions we are currently operating in: the Yangtze Delta, the Pearl River Delta, and the three Northeast China provinces. Soft Drinks and Foods Business Division In our domestic soft drinks and food operations, Kirin Beverage will put further effort into strong brand creation as part of its initiatives to restructure competitiveness and reform earning structure. Towards restructuring competitiveness, Kirin Beverage will implement a selection and concentration strategy, review resource allocation and enter new categories. We are aiming to establish a value proposal marketing, rigorously reviewing our cost structure and developing a robust business structure that can be profitable even in a harsh operating environment. In China, we will promote an integrated beverages group strategy to improve earnings. As part of KIRIN Health Initiative, Kirin Beverage, Koiwai Dairy Products Co., Ltd. and Kirin Kyowa Foods will launch products in April, under a new Groupwide brand, KIRIN Plus-i, that provide new value in the area of food and health, suited to customers personal health needs. At Kirin Kyowa Foods, we will endeavor to improve our value proposal marketing and development structure in order to promote distinctive products to increase earnings. We will continue to solidify the business infrastructure in the wake of integration of the industrial-use alcohol and fermented seasoning businesses and maximize group synergies. In the overseas market, we will strengthen regular brands at National Foods and aim to enter new growth categories as well. Further integration with Dairy Farmers will be pursued to create more synergistic effects in the process. 9

10 Pharmaceuticals Business Division In the Pharmaceuticals business operated by Kyowa Hakko Kirin, with anticipated medicine price revision, we will aim to strengthen our main products such as those focusing on kidney conditions, as well as market new products by establishing a more efficient and effective business system. In R&D, we regard cancer, kidney and immunity/infectious diseases as our priority areas, and will follow through with clinical trials in both Japan and overseas according to a specific timeline and also aggressively pursue licensing activities. Other Businesses Divisions In the Biochemical business operated by Kyowa Hakko Bio, we will strive to expand the sales of value-added amino acids in the areas of medicine and healthcare, and also to streamline our overseas sales and marketing structure. In the Chemicals business operated by Kyowa Hakko Chemical, we will focus on strengthening functional product lines which are environmentally considerate, thereby building a business model less susceptible to economic fluctuations. CSR Initiatives CSR is an important management issue within Kirin Group. We are striving to incorporate the development of a sustainable society into our business operations CSR through business while also pursuing CSR as a corporate citizen. In CSR through Business, we are undertaking further initiatives to become a low-carbon corporate group. We are reducing our use of water and other resources, reducing energy consumption at factories by converting machinery to alternative fuels, and targeting a 35% reduction in CO 2 emissions from manufacturing, distribution and office activities by 2015 compared to that of We are also developing products that have a lower environmental burden, and across the procurement-to-consumption value chain of the entire Group, both in Japan and in our international operations, we aim to halve total CO 2 emissions by 2050 compared to 1990 levels. As a Group, we are actively involved in initiatives to resolve social issues. For example, with the launch of Kirin FREE, a 0.00% alcohol beer-taste beverage, we are helping to eliminate drink driving, while other measures include CSR-based procurement and initiatives for diversity in human resources. We have advanced risk management and compliance systems in place within the Group, and we are implementing a range of measures to strengthen systems for group-wide quality control and environmental management. With regard to CSR as a corporate citizen, we have supported Japan s national soccer team continuously for more than 30 years, with the focus this year on the World Cup in June. We support a number of initiatives to allow children to 10

11 experience the joy of sport, including our nationwide Kirin Soccer Field training program. We also contribute to society through forestry and watershed management and employee volunteer activities. Kirin s initiatives under CSR as a corporate citizen encompass activities beyond the scope of Kirin s actual business operations, and include a wide range of social contribution activities connected with the environment, sports, and other areas. In the spirit of its Group slogan, Oishisa wo Egao ni (Good taste makes you smile), Kirin Group will seek to stand beside its customers, develop diverse bonds with them, and share the happiness of food and health. Kirin Group is grateful for the continued support of its shareholders. 11

12 (3) State of assets and income of Kirin Group 168 th term 169 th term 170 th term 171 st term Item (Jan. 1, 2006 (Jan. 1, 2007 (Jan. 1, 2008 (Jan. 1, 2009 Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2006) 2007) 2008) 2009) Sales 1,665,946 1,801,164 2,303,569 2,278,473 Operating income 116, , , ,435 Ordinary income 120, , , ,614 Net income 53,512 66,713 80,182 49,172 Net income per share Net assets 1,043,724 1,099,555 1,149,998 1,198,869 Net assets per share 1, , , Total assets 1,963,586 2,469,667 2,619,623 2,861,194 Consolidated sales Sales by business division ( 2,500 billion) 2,000 1,500 Pharmaceuticals 9.1% Other, 10.4% 1, Soft Drinks and Foods, 32.3% Alcohol Beverages, 48.2% 0 168th 168term th 169th 169term th 170th 170term th 171st 171term st (term) 12

13 Sales and operating income results by business division are as follows: Sales Division Alcohol Beverages Business Soft Drinks Business Soft Drinks and Foods Business Pharmaceuticals Business Other Businesses Total 168 th term 169 th term 170 th term 171 st term (Jan. 1, 2006 (Jan. 1, 2007 (Jan. 1, 2008 (Jan. 1, 2009 Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2006) 2007) 2008) 2009) 1,099, ,729 67, ,664 1,665,946 1,189, ,560 69,909 67,216 1,801,164 1,181,509 1,097, , , ,853 2,303, , , ,986 2,278,473 Operating income Division Alcohol Beverages Business Soft Drinks Business Soft Drinks and Foods Business Pharmaceuticals Business Other Businesses Subtotal Elimination and unallocatable costs Total 168 th term 169 th term 170 th term 171 st term (Jan. 1, 2006 (Jan. 1, 2007 (Jan. 1, 2008 (Jan. 1, 2009 Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2006) 2007) 2008) 2009) 86,510 19,714 12, ,830 ( 2,472) 116,358 96,563 16,030 13,001 6, ,924 ( 11,316) 120, , ,800 6,431 28,200 18, ,901 ( 16,924) 145,977 7,099 34,334 3, ,089 ( 19,654) 128,435 (Notes) 1. Sales of each business division indicate the sales to unaffiliated customers. 2. Due to changes in our method of categorizing operations, engineering, logistics businesses, etc. were shifted from its Other Businesses Divisions to its Alcohol Beverages Business Division from the 169 th term. Sales and operating income by business division for the 168 th term are presented according to such a new 13

14 business segment classification method. Previously, the Company s indirect department costs were allocated to each business division based on sales criteria. After the Company s transition to a pure holding company structure, however, they were included in unallocatable costs as group management costs arising at the Company that is the Group s holding company. 3. Due to changes in our method of categorizing operations, foods, health foods and functional foods businesses etc. previously included in the Other Businesses Divisions were shifted to the Soft Drinks Business Division and its division name was changed to the Soft Drinks and Foods Business Division. Sales and operating income by business division for the 169 th term are presented according to such a new business segment classification method. (4) Kirin Group plant and equipment investment Consolidated plant and equipment investment for the term under review amounted to billion on a payment basis, a decrease of 15.8 billion compared to the previous term. Major facilities completed during the term under review and under construction or contemplation as of the end of the term are as follows: 1) Major facilities completed during the term under review Business Division Soft Drinks and Foods Business Other Businesses Company Name Kirin Beverage Co., Ltd. Kirin Holdings Company, Limited Details of the plant and equipment investment Kanto Metropolis Area Div. and Others Renewal and installation of vending machines Former Amagasaki Plant Site Commercial complex (COCOE) construction 14

15 2)Major facilities under construction or contemplation as of the end of the term under review Business Division Alcohol Beverages Business Soft Drinks and Foods Business Pharmaceuticals Business Company Name Kirin Brewery Co., Ltd. Lion Nathan Ltd. Kirin Beverage Co., Ltd. Kyowa Hakko Kirin Co., Ltd. Details of the plant and equipment investment Shiga Plant Partial demolition and construction of brewing facilities of beer and happo-shu, etc. Yokohama Plant Improvement of brewing facilities of beer and happo-shu and construction of offices, etc. Auckland Plant Construction of brewing facilities of beer, etc. Kanto Metropolis Area Div. and Others Renewal and installation of vending machines Bio Process Research and Development Laboratories - Expansion of Pharmaceutical production facility Tokyo Research Park - Construction of research building (5) Kirin Group financing The aggregate amount of loans payable, including bonds, was billion as of the end of the fiscal year under review. This was an increase of billion compared to the end of the previous term. Main financing for the fiscal year under review was a total amount of billion through the issuance of unsecured straight bonds and billion in short-term loans from financial institutions. These funds were raised for the change in the status of Lion Nathan Ltd. to a wholly-owned subsidiary. 15

16 The information hereunder is as of December 31, 2009, unless noted otherwise. (6) Description of the main businesses of Kirin Group The main businesses of Kirin Group are the production and sale of alcohol beverages, soft drinks and foods, pharmaceuticals, and other products. The principal products by business division are as follows: Business Division Alcohol Beverages Soft Drinks and Foods Pharmaceuticals Principal products Beer, Happo-shu, New genre, Chu-hi, Cocktail, Shochu, Wine, Liquors, etc. Soft drinks, dairy products, other foods, etc. Prescription medicine (7) Major business offices, plants, etc. in Kirin Group 1) Kirin Holdings Company, Limited Head Office: 10-1, Shinkawa 2-chome, Chuo-ku, Tokyo Laboratories: Central Laboratories for Frontier Technology (Yokohama, etc.) 16

17 2) Major subsidiaries Business Company Division Name Alcohol Beverages Soft Drinks and Foods Pharmaceuticals Other Kirin Brewery Co., Ltd. Mercian Corp. Kirin (China) Investment Co., Ltd. Kirin Beverage Co., Ltd. Kyowa Hakko Kirin Co., Ltd. Lion Nathan National Foods Pty Ltd Head Office Branch Offices Plants Laboratories Head Office Branch Offices Plants Head Office Head Office Branch Offices Plants Laboratories Head Office Branch Offices Plants Laboratories Head Office Major centers Chuo-ku, Tokyo 10 Regional Sales & Marketing Divisions including Metropolitan Regional Sales & Marketing Division (Chuo-ku, Tokyo) 11 Plants including Yokohama Plant (Yokohama) Research Laboratories for Brewing, Research Laboratories for Packaging (Yokohama) Chuo-ku, Tokyo 3 Sales Headquarters including Eastern Japan Sales Headquarters (Chuo-ku, Tokyo) 6 Plants including Fujisawa Plant (Fujisawa) Shanghai, China Chiyoda-ku, Tokyo 7 Area Divisions including Kanto Metropolis Area Division (Chiyoda-ku, Tokyo) Shonan Plant (Samukawa-machi, Koza-gun, Kanagawa), Maizuru Plant (Maizuru) Laboratory for New Product Development, Laboratory for Core Technology Development (Yokohama) Chiyoda-ku, Tokyo 17 Branches including East-Tokyo Branch (Chuo-ku, Tokyo) 5 Plants including Fuji Plant (Nagaizumi-cho, Suntou-gun, Shizuoka) and Takasaki Plant (Takasaki) 6 Laboratories including Tokyo Research Park (Machida, Tokyo) and Fuji Research Park (Nagaizumi-cho, Suntou-gun, Shizuoka) Sydney, New South Wales, Australia 17

18 (Note) Lion Nathan National Foods Pty Ltd, the holding company for our Oceania operations, is classified in Other Businesses because its subsidiaries Lion Nathan Ltd. and National Foods Limited are affiliated with the Alcohol Beverages Business Division and the Soft Drinks and Foods Business Division, respectively. (8) Employees of Kirin Group Division Number of employees (persons) Alcohol Beverages Business 12,499 [4,113] Soft Drinks and Foods Business 11,763 [1,903] Pharmaceuticals Business 4,718 [ 67] Other Businesses 5,504 [ 309] Administration 666 [ 19] Total 35,150 [6,411] (Notes) 1. The number of employees indicates the number of employees currently on duty. 2. The yearly average number of temporary employees is separately indicated in brackets. 3. The number of the Company s employees is 276 (excluding employees seconded by the Company and including employees seconded to the Company). (9) Significant subsidiaries, etc. 1) Significant subsidiaries Company Name Location Capital Kirin Brewery Co., Ltd. Mercian Corp. Kirin (China) Investment Co., Ltd. Chuo-ku, Tokyo Chuo-ku, Tokyo Shanghai, China 30,000 20,972 U.S.$180,000 thousand Ratio of voting rights held by the Company 100% 50.8% 100% Description of principal businesses Production and sale of alcohol beverages Import, production and sale of alcohol beverages Management of beer business in China 18

19 Company Name Location Capital Kirin Beverage Co., Ltd. Kirin Kyowa Foods Company, Limited Kyowa Hakko Kirin Co., Ltd. Lion Nathan National Foods Pty Ltd Chiyoda-ku, Tokyo Shinagawa-ku, Tokyo Chiyoda-ku, Tokyo Sydney, New South Wales, Australia 8,416 3,000 26,745 A$6,061 Ratio of voting rights held by the Company 100% *100% 51.2% 100% Description of principal businesses Production and sale of soft drinks Production and sale of seasonings, etc. Production and sale of prescription medicine Management of business in Oceania (Note) The ratio of voting rights marked with an asterisk (*) includes those held by the subsidiaries. 2) Significant affiliated companies Company Name Location Capital San Miguel Brewery, Inc. Kirin-Amgen, Inc. Mandaluyong City, Metro Manila, the Republic of the Philippines Thousand Oaks, California, U.S.A. P15,410 Ratio of voting rights held by the Company 48.4% U.S.$ % Description of principal business Production and sale of beer Research and development of pharmaceuticals (10) Status of significant business transfers from and to Kirin Group and the acquisition or disposal of shares of other companies 1) Kyowa Hakko Food Specialties Co., Ltd. effected an absorption-type merger with Kirin Food-Tech Company Limited and changed its trade name to Kirin Kyowa Foods Company, Limited. 2) The Company acquired a share of 48.4% of outstanding shares in San Miguel Brewery, Inc. through tender offer and private transaction with San Miguel 19

20 Corporation. In association with this, the entire share of 19.9% of outstanding shares in San Miguel Corporation which the Company held has been transferred. Please note that San Miguel Brewery, Inc. has signed a share purchase agreement for the acquisition of San Miguel Brewing International Limited, a wholly owned subsidiary of San Miguel Corporation. 3) The Company acquired, through Kirin Holdings (Australia) Pty Ltd (now Lion Nathan National Foods Pty Ltd), 53.9% of outstanding shares issued of Lion Nathan Ltd., a subsidiary of Kirin Holdings (Australia), making it a wholly owned subsidiary.* This resulted in the integration of Lion Nathan Ltd. and National Foods Limited under the holding company Lion Nathan National Foods Pty Ltd. * As per a scheme of arrangement whereby all shares may be acquired after meeting certain requirements. (11) Principal lenders and the amount of loans of Kirin Group Syndicated loan * Lender Mitsubishi UFJ Trust and Banking Corporation Outstanding amount of loan 238,887 87,128 (Note) Syndicated loan * with The Bank of Tokyo-Mitsubishi UFJ, Ltd. as the sole agent bank. 20

21 2. State of shares (1) Total number of shares authorized to be issued 1,732,026,000 shares (2) Total number of issued shares 984,508,387 shares (No change from the end of the previous term) (3) Number of shareholders 126,808 persons (Decreased by 6,828 persons from the end of the previous term) (4) Major shareholders (top ten) Name of shareholder Japan Trustee Service Bank, Ltd. (Trust account ) The Master Trust Bank of Japan, Ltd. (Trust account) Number of shares held by the shareholder (thousand shares) Ratio of shares held (%) 48, , Meiji Yasuda Life Insurance Company 43, The Bank of Tokyo-Mitsubishi UFJ, Ltd. 35, Isono Shokai, Limited 23, Japan Trustee Service Bank, Ltd. (Trust account 4) The Mellon Bank, N.A. Treaty Client Omnibus The Nomura Trust and Banking Co., Ltd. (Retirement Benefit Trust for Mitsubishi UFJ Trust and Banking Corporation) Tokio Marine & Nichido Fire Insurance Co., Ltd. 17, , , , Mitsubishi Corporation 11, (Note) Ratio of shares held excludes treasury stock (31,166 thousand shares). 21

22 3. Status of the Company s Directors and Corporate Auditors (1) Names of Directors and Corporate Auditors, etc Title President (Representative Director) Executive Vice President (Representative Director) *Executive Vice President (Representative Director) Name Position and important positions concurrently held at other companies Kazuyasu Kato Kazuhiro Sato Senji Miyake Responsible for Group Personnel & General affairs Strategy, Legal, Internal Control and Internal Audit Responsible for Integrated Beverages Group Strategy Managing Director Etsuji Tawada Responsible for Group R&D and Group Information Strategy Managing Director Yoshiharu Furumoto Responsible for Group Financial Strategy and PR & IR Strategy and Director of Lion Nathan National Foods Pty Ltd *Managing Director Yuji Owada Responsible for Group Production and Logistics Strategy, CSR & Risk Management & Compliance and Director of San Miguel Brewery, Inc. Director Yuzuru Matsuda President & CEO of Kyowa Hakko Kirin Co., Ltd. Director Satoru Kishi Senior Advisor of The Bank of Tokyo-Mitsubishi UFJ, Ltd. Director Akira Gemma Advisor of Shiseido Co., Ltd. Standing Corporate Auditor Standing Corporate Auditor Corporate Auditor Hitoshi Oshima Tetsuo Iwasa Toyoshi Nakano Corporate Auditor of Kirin Brewery Co., Ltd. and Mercian Corp. Corporate Auditor of Kirin Beverage Co., Ltd. and Kirin Business Expert Co., Ltd. Senior Advisor of Mitsubishi UFJ Trust and Banking Corporation 22

23 Title Name Position and important positions concurrently held at other companies Corporate Auditor Teruo Ozaki President of Teruo Ozaki & Co. (Certified Public Accountant) Director of The Bank of Tokyo-Mitsubishi UFJ, Ltd. Corporate Auditor Kazuo Tezuka Attorney at Kaneko & Iwamatsu (Notes) 1. Directors marked with an asterisk (*) assumed office as of March 26, Mr. Satoru Kishi and Mr. Akira Gemma are outside Directors as provided for in Article 2, Section 15 of the Corporation Law. 3. Corporate Auditors Mr. Toyoshi Nakano, Mr. Teruo Ozaki and Mr. Kazuo Tezuka are outside Corporate Auditors as provided for in Article 2, Section 16 of the Corporation Law. 4. Business relations involving cash loans, etc. exist between the Company and The Bank of Tokyo-Mitsubishi UFJ, Ltd., where Director Mr. Satoru Kishi and Corporate Auditor Mr. Teruo Ozaki both hold important positions concurrently. 5. Business relations involving cash loans, etc. exist between the Company and Mitsubishi UFJ Trust and Banking Corporation, where Corporate Auditor Mr. Toyoshi Nakano holds an important position concurrently. 6. Corporate Auditor Mr. Teruo Ozaki is a Certified Public Accountant and has a wealth of expertise in finance and accounting. 7. Directors listed hereunder retired as of March 26, Chairman Koichiro Aramaki Managing Director (Representative Director) Koichi Matsuzawa (2) Remuneration to Directors and Corporate Auditors for the fiscal year under review Annual remuneration monthly paid Number of persons Directors Corporate Auditors Total Amount Number Amount Number (s of (s of of yen) persons of yen) persons 10 (2) 365 (23) Bonus 8 (2) 158 (1) Total 523 (24) (Notes) 1. 5 (3) 104 (35) 5 16 (3) (3) 121 (38) 15 (5) Amount (s of yen) 470 (58) (5) (4) 645 (63) Nine (9) Directors and five (5) Corporate Auditors remain in their positions as of December 31, The total amount above includes remuneration to two (2) Directors who retired from office as of March 26,

24 2. The numbers in brackets indicate remuneration for outside Directors and Corporate Auditors included in the number above. 3. The remuneration limit for Directors is 50 per month (Resolved at the 164 th Ordinary General Meeting of Shareholders on March 28, 2003). 4. The remuneration limit for Corporate Auditors is 9 per month (Resolved at the 167 th Ordinary General Meeting of Shareholders on March 30, 2006). 5. The above bonus for Directors and Corporate Auditors is an amount expected to be paid on condition that the original proposition No. 4 of the 171 st Ordinary General Meeting of Shareholders is approved. (3) Primary activities of outside Directors and outside Corporate Auditors during the fiscal year Title Director Corporate Auditor Name Satoru Kishi Akira Gemma Toyoshi Nakano Teruo Ozaki Kazuo Tezuka Attendance at Board of Directors meetings 6 times of 24 meetings 23 times of 24 meetings 20 times of 24 meetings 22 times of 24 meetings 23 times of 24 meetings Attendance at Board of Corporate Auditors meetings 13 times of 14 meetings 13 times of 14 meetings 13 times of 14 meetings Statements Contribution He was president at a bank. He made statements from his experience and perspective as a management executive. He was president at a consumer product manufacturing company. He made statements from his experience and perspective as a management executive. He was president at a trust bank. He made statements from his experience and perspective as a management executive. He made statements primarily from his professional perspective as a CPA. He made statements primarily from his professional perspective as an attorney. 24

25 4. Status of Independent Auditor (1) Name of Independent Auditor KPMG AZSA & Co. (2) Remuneration to the Independent Auditor during the fiscal year under review 1) Total remuneration paid by the Company to the Independent Auditor for audit certification in 91 accordance with Article 2, Paragraph 1 of the Certified Public Accountants Law 2) Total remuneration paid by the Company to the Independent Auditor for services other than those 131 stipulated in Article 2, Paragraph 1 of the Certified Public Accountants Law 3) Total audit remuneration paid by the Company to the 223 Independent Auditor (Notes) 1. The audit agreement between the Independent Auditor and the Company does not separately stipulate audit remunerations based on the Corporation Law or the Financial Instruments and Exchange Law. Hence, the remuneration in 1) above does not separate these two types of payment. 2. The remunerations described in 2) above are payments for duties of the advisory service concerning internal control related to financial reporting, etc. Total amount and other property benefits paid by the Company and its subsidiaries 385 (Note) Of the significant subsidiaries of the Company, four (4) companies including Kyowa Hakko Kirin Co., Ltd. and Mercian Corporation are subject to audits of accounts (limited to audits stipulated in the Corporation Law or the Financial Instruments and Exchange Law (including similar foreign laws)) by a certified public accountant or incorporated accounting firm (including overseas auditors possessing similar qualifications) other than the Independent Auditor of the Company. 25

26 (3) Policy regarding decisions to dismiss or deny reappointment of Independent Auditor If the Company s Board of Auditors determines that any of the Sections of Article 340, Paragraph 1 of the Corporation Law applies with respect to the Independent Auditor, it shall dismiss the Independent Auditor. Such dismissal shall require the unanimous agreement of all the corporate auditors. In addition, if it is determined that any of the Sections of Article 340, Paragraph 1 of the Corporation Law applies with respect to the Independent Auditor, the Company s Board of Directors shall, with the consent of, or upon a request from, the Board of Auditors, submit a proposition calling for the dismissal of the Independent Auditor to the General Meeting of Shareholders. Alternatively, if it is determined that a change of Independent Auditors is necessary because of the manner in which the Independent Auditors is executing its duties or because of the Company s system of auditing, the Board of Directors shall submit a proposition calling for the denial of reappointment of the Independent Auditor to the General Meeting of Shareholders. 26

27 5. System to secure the appropriate operations The outline of a system to secure the appropriate operations of the Company (the internal control system) that the Company resolved at its Board of Directors Meeting is as follows. (1) System to secure compliance of performance of duties by the Directors and employees with laws and the articles of incorporation ( Compliance System ) The Directors shall establish basic policy on the compliance of Kirin Group and promote the policy by maintaining an organization and provisions to execute the policy and integrating them with the activities in various sectors. In addition, the Directors shall carry out educational programs on compliance, clarify procedures concerning responses to breaches of compliance, and make those procedures public throughout the Group. The Internal Audit Department shall carry out internal auditing to secure that these systems are properly developed and applied. Also, the Directors shall establish internal control reporting system to ensure reliability of the financial reports and conduct their operation and evaluation effectively and efficiently. (2) System to secure the proper preservation and maintenance of information regarding the performance of duties by Directors ( System of Information Preservation and Maintenance ) The Directors shall preserve the following documents (including electromagnetic record) together with the related materials for at least ten (10) years and make them available for inspection as necessary. Minutes of Shareholders Meetings Minutes of Board of Directors Meetings Minutes of Group Executive Committee meetings and other important meetings Approval applications (approval authority of the heads of divisions and above) Financial statements, business reports, and their detailed statements (3) Regulations and other systems related to the control of the risk of loss ( Risk Management System ) The Directors shall establish basic policy on the risk management of Kirin Group and promote the policy by maintaining an organization and provisions to execute the policy and integrating them with activities in various sectors. In addition, the Directors shall carry out educational programs on risk management, clarify procedures concerning the disclosure of risks and responses to the occurrence of crises, and make those procedures public throughout Kirin Group. The Internal Audit Department shall carry out internal auditing to secure that these systems are properly developed and applied. 27

28 (4) System to secure the efficient performance of duties by the Directors ( Efficient Performance System ) The Directors shall maintain a management control system comprising the following items to secure the efficient performance of duties. In addition to the Board of Directors meetings, the Group Executive Committee shall be organized to deliberate significant matters affecting the entire Group, thereby ensuring that decisions are reached carefully based on considerations of multi-dimensional aspects. Establish quantitative and qualitative targets in the annual plan by business category and monitor performance, including quarterly monitoring (KVA management system*) * Kirin s own strategy management system with EVA as the Group s common financial indicator. (5) System to secure the appropriate operations for group companies comprising a company, its parent company, and subsidiaries ( Group Internal Control System ) In order to secure the appropriate operations for Kirin Group, the Directors shall establish rules and standards to be applied to the Group companies, including the following items, and carry out operation in compliance with these rules and standards. Items related to the governance and monitoring of each Group company Items related to guidance and management concerning the maintenance of the internal control system for each Group company Items related to the communication system* linking the Group companies Items related to the Group internal auditing system operated by the Internal Audit Department * The system to share information within the Group, the compliance hotline system, and other related items (6) System to assign employees as support staff for Corporate Auditors when Corporate Auditors request support staff (together with (7), (8) and (9) below, Corporate Auditor Related System ) Employees of the Company will be assigned as support staff for Corporate Auditors. (7) Items related to the assurance that the employees assigned as support staff as mentioned in the preceding provision remains independent from the Directors In order to secure independence of the employees assigned as support staff as mentioned in the preceding provision, the consent of the Corporate Auditors shall be required for any decision related to personnel affairs, including the appointment and transfer of such employees. Such employees shall not assume any other appointment related to the operation of business simultaneously. 28